In a June 23 research note, analyst Craig Stanley indicated that Eight Capital raised its target price on Wesdome Gold Mines Ltd. (WDO:TSX) to CA$4.70 per share from CA$3. In comparison, the current share price is CA$3.71 per share. This boost in the price target comes following Eight Capital's site visit to Wesdome's Kiena project and discussions with management, which prompted a company model revision.
Wesdome aims to produce about 200,000 ounces per year (200 Koz/year) gold by increasing underground mining at its Eagle River project in Ontario and restarting production at its Kiena mine in Quebec. "Our valuation is dependent on significant resource and reserve expansion at both assets but believe recent exploration success warrants such an increase in these historically capital starved projects," Stanley noted.
As for Eagle River, Wesdome intends to supply the mill solely with underground ore versus with half underground/half open-pit ore as has been the case, Stanley relayed. This will require a material increase in resources and reserves along with further underground development, including that of working faces.
To achieve the additional resources and reserves needed, the company is currently conducting 50,000 meters (50,000m) of underground and 5,100m of surface drilling on the property. "We model additional reserves of 480 Koz at 10 grams per ton gold," wrote Stanley.
Regarding future production at Eagle, the analyst estimated the mine "will achieve steady-state throughput of 850 tons per day (850 tpd) starting in 2022 with no additional capital required outside of current sustaining capex levels."
As for Kiena, Wesdome is currently exploring the property, intending to complete 50,000m of underground and 11,900m of surface drilling. Stanley noted that "a steady stream of incredibly high-grade assays out of Kiena" will likely continue the recent upward movement in Wesdome's share price.
In addition, Wesdome is extending the exploration ramp at Kiena by 450m to "allow better testing of the possible plunge extension of the A zone to the northwest, southeast and down dip," Stanley explained. This is slated for completion in Q4/18.
Wesdome plans to release a resource estimate for Kiena by the end of 2018, which will encompass results from drilling in the auxiliary VC and S50 South zones.
With respect to future production at Kiena, Stanley wrote, "We model a mineable resource of 1 million ounces at 7.5 grams per ton gold at a throughput rate of 1,500 tpd, producing 111 Koz/year, starting in Q4/20 and ramping up through 2021."
Stanley concluded the report by pointing out that Wesdome, with two Canadian assets having the potential to produce 100+ Koz of gold, is a takeout target. This is particularly true of midcap miners wanting to boost production in a mining-friendly jurisdiction. "We believe large and mid-cap gold producers are closely following Wesdome's progress at Kiena," Stanley said.[NLINSERT]
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Disclosures from Eight Capital, Wesdome Gold Mines, Target Revision, July 23, 2018
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